Immigration and Trade Creation: Econometric Evidence from Canada

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.Abstract. Immigrants may expand trade with their country of origin, owing to superior knowledge of, or preferential access to, market opportunities. We test this proposition using Canadian trade data with 136 partners from 1980 to 1992. In an augmented gravity equation we find that a 10 per cent increase in immigrants is associated with a 1 per cent increase in Canadian exports to the immigrant's home country and a 3 per cent increase in imports. We also find that among the primary categories of immigrants, independants have the greater influence on trade. Immigration via the entrepreneur class appears to have less impact on trade than all other classes except refugees. Immigration et expansion du commerce international: des resultats econometriques pour le Canada. Les immigrants peuvent accroitre le niveau du commerce international avec leur pays d'origine a cause de leur meilleure connaissance des possibilit6s de commerce ou de leur acces pr6f6rentiel a ces march6s. Les auteurs mettent cette proposition au test en utilisant les donn6es sur le commerce international avec 136 partenaires de 1980 a 1992. Les r6sultats montrent qu'une augmentation de 10% des immigrants est associ6e a une augmentation de 1% dans les exportations canadiennes vers le pays d'origine des immigrants et a une augmentation de 3% dans les importations en provenance de ces pays. Il appert que ce sont les immigrants ind6pendants qui ont l'influence la plus grande sur le commerce international L'immigration sous la rubrique entrepreneur semble avoir un effet moindre sur le commerce international que celles de toutes les autres classes d'immigrants a l'exception des r6fugi6s.While international trade has increased relative to world GDP in the postwar era, cross-border trade flows remain at much lower levels than those that would prevail in a fully integrated world economy. Manufacturers in Canada, for instance, supply 60 per cent of the Canadian market despite the fact that Canada produces only 2.5 per cent of world GDP. With the dismantling of most formal barriers to international The authors are grateful to two anonymous referees, Clive Chapple, Don Devoretz, Elizabeth Ruddick, and Ed Safarian for their helpful suggestions. We thank Meng Zhang for her assistance in constructing the data set and Jennifer Cliff for helping us to understand the immigration application procedure. Canadian Journal of Economics Revue canadienne d'Economique, xxxI, No. I February f6vrier 1998. Printed in Canada Imprime au Canada 0008-4085 / 98 / 47-62 $1.50 ? Canadian Economics Association 48 Keith Head and John Ries trade, transportation and transaction costs emerge as principal explanations of why trade remains largely within nation...

Migration and foreign direct investment: education matters

“…The role migrants can play in promoting bilateral trade and investment is nowadays well recognized, thanks to the seminal work of Gould (1994) and subsequent research. There is an abundant literature on the link between migration and bilateral trade, for example by White (2009), Tadesse and White (2008), Bacarreza and Ehrlich (2006), Jansen and Piermartini (2005), Girma and Yu (2002), Head andRies (1998), andGould (1994). These studies indicate that migration has a significant impact on international (bilateral) trade, as the presence of migrants decreases trade and investment barriers.…”

Market structure and the link between migration and trade

“…However, Sect. 2 shows that Gould (1994) and Girma and Yu (2002) find migration has a greater effect on exports while Head and Ries (1998) and Wagner et al (2002) find that migration has a greater impact on imports. Whereas the first set of papers studies a small sample made up largely of rich trade partners, the second set considers all the partners.…”

Does Immigration Stimulate Foreign Trade? Evidence from Sweden

“…Gould (1994) found a statistically significant link between immigrants to the United States and US trade with their countries of origin. Head and Ries (1998) found a similar link for Canada, estimating an import elasticity at 0.3% and export elasticity at 0.1%. Girma and Yu (2002) demonstrated a positive link between exports and immigration from countries outside the former British Empire, although no significant link could be demonstrated for migration within the former Empire.…”

“…Thus, as a robustness check, the models are estimated with the lagged dependent variable, . Hence, the extended model to be estimated is (6) This approach follows Gould (1994) and Head and Ries (1998), who interpret it as a partial adjustment model. Table 5 displays the results of regressions in which the lagged dependent variable was included and year dummies were dropped.…”